Plan for retirement with this simple checklist

We all know it’s prudent and sensible to get our finances in order before we retire. But in reality, many procrastinate on this matter.

46% of Hong Kong women and 43% of Hong Kong men are not confident of having sufficient funds for retirement, according to Fidelity’s Global Women & Money Study 2022. 

It pays to plan and save for retirement early, so that we avoid being financially insecure and having to work in old age.

Want a comfortable retirement? Here are four things to check off to prepare for your golden years, if you have not already started.

Set your monthly expenses in retirement

There are two categories of spending you should make a list for. The first category consists of essentials and necessities, such as food, housing, transportation, utilities, healthcare, and so on. 

The second category is your discretionary spending — think travel, hobbies, and other activities that you would want to pursue after retiring. What type of lifestyle do you want in retirement?

Once you have estimated your total expenses, you will have a realistic sense of how much you need to save up, as well as how much wiggle room you should leave for adjustments to any expenditures if necessary.

 Don’t forget to account for inflation in your calculations. Inflation eats away at our purchasing power.

Consider the sources of your retirement income

In general, income in your retirement years in Hong Kong may come from your MPF/ORSO withdrawals, your investment portfolio, government allowances, rental income if you own a property, private annuity plans, insurance plans and reverse mortgages.

Your investment portfolio should ideally comprise a variety of assets, which may include stocks, bonds, real estate, and alternative assets. It is important to diversify your portfolio to manage the risks, and to review the allocation and performance regularly should you need to rebalance it to keep up with market changes or any changes in your financial situation and goals.

If you own an investment property, note that you have to pay taxes on the rental income earned from leasing it out.

Protect against unexpected expenses 

Your next step is to be prepared for potential unforeseen circumstances, where possible.

If you are the sole breadwinner for your family, you can purchase insurance to provide them with financial security should you pass away, become permanently disabled, or become unable to work due to an illness. A life insurance plan, disability income insurance, and critical illness insurance can address those concerns respectively.

Healthcare costs in Hong Kong have been rising over the years and are expected to grow by 8.8% in 2023 according to WTW’s 2023 Global Medical Trends Survey.  Although Hong Kong’s public healthcare system is very affordable with high medical standards, waiting time at public hospitals can be very long, in certain cases one may consider using services at private hospitals which often comes with a hefty price tag. It is not legally required to purchase health insurance in Hong Kong, but you can consider purchasing voluntary health insurance (VHIS) which is also tax deductible.

Don't forget legacy planning 

Last but not least, legacy planning is key if you wish to bequeath your assets to your loved ones after your death. It involves thinking about how to preserve your wealth and how to pass it to your loved ones.

You will need to make important decisions such as who to appoint for the lasting power of attorney, how your overall assets will be distributed, and your preferences for medical care if you become terminally ill or incapacitated. 

Ensure that your will is updated with clear instructions, and that your documents will be accessible in case of emergency. We dive deeper into this topic here.

Planning for retirement with this simple checklist can help to provide peace of mind in your later years. Learn about your income building options with Endowus, get started here.

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